Thursday, May 31, 2007

Migration and Germany

The German Federal Statistics Office has released the migration flow data for 2006:

As reported by the Federal Statistical Office on the basis of provisional results, 662,000 persons in-migrated to Germany in 2006 and 639,000 persons out-migrated. This results in net inward migration of 23,000 persons. That was 46,000 in-migrations less and 11,000 out-migrations more than in 2005. Consequently, net inward migration decreased strongly from the previous year (–71%), following a decrease by just 4% from 2004 to 2005.

So there is a net inward balance of migrants in 2006 of 23,000. In view of the significant ageing process which is taking place in Germany this is indeed preoccupying. We have commented on this situation on DM a number of times (and here). In today's Financial Times there is some evidence of the impact the lack of substantial inward migration is having on some sectors of the German economy:

Germany’s decision to restrict the working rights of east Europeans is hitting consumers where it hurts – their asparagus steamers.

After this year’s warm, wet spring, the sandy plains of central Germany should have yielded an asparagus vintage for the history books. Instead, entire fields of the delicacy are rotting unplucked. Farmers, politicians and economists are scrambling for an explanation.

At the Federal Statistical Office, which charts the amount produced in the country, experts are warning about a paradoxical year, with a harvest below the record 82,000 tons registered in 2005 despite better growing conditions.

Everyone agrees on the reason; there is a shortage of pickers. The 300,000 foreign seasonal hands, mainly Poles, who normally work the three-month “Spargelsaison” seem to have better things to do this year.

Jürgen Jakobs, who runs a farm in Beelitz, the Vatican of asparagus culture, says only two-thirds of the 300 Poles he wanted to hire this year bothered to respond, forcing him to leave 15 per cent of his land unharvested. These fields are now covered in two-metre high, inedible green ferns.

For free-market liberals, the blame lies with government. Last year Berlin was one of six older members of the European Union to extend restrictions on citizens from new member states working in the country......

Herbert Buscher, economist at the IWH research institute in Halle, agrees that Germany, whose booming economy is now suffering from drastic shortages of workers in certain sectors, has “shot itself in the foot with its restriction to the free movement of workers”.

I would emphasise at this point that there are three things to think about here.

a) the German labour market is obviously suffering a net human capital loss (just like Italy) since those leaving are better educated than those arriving. This will have an impact on productivity growth (and TFP) in the future.

b) Germany will undoubtedly have to change course on migration since they have basic needs in areas like agriculture and care of the elderly that they simply cannot meet domestically. These are also two areas which have been important in Spain. Almost no Spanish nationals are new entrants into the unskilled end of these sectors.

c) the fact that Germany is not able to generate a SUSTAINED construction boom means that it will not get - whatever the changes in policy - the volume of migration necessary to generate the feedback mechanisms we see at work in Ireland, the US, the UK, Greece, Spain etc, and thus and thus the new migration they may get will not materially affect the population ageing process in Germany, or produce the much needed revival in internal consumption.

For some economic explanation for the assertion made in (c) see this recent post on Ireland and this one on migrant flows into the US.

My guess is that all those societies who have inadvertently let their median age rise significantly over the 40 watermark are going to be faced with significant issues in this regard.


This human capital impact of Germany's outflow is one topic which seems to be gaining traction. I am updating with some extracts from this to the point piece in the Independent yesterday:

German brain drain at highest level since 1940s

Leading economists and employers say the trend is alarming. They note that many among Germany's new breed of home-grown "guest workers" are highly-educated management consultants, doctors, dentists, scientists and lawyers.

OECD figures show that Germany is near the top of a league of industrial nations experiencing a brain drain which for the first time since the 1950s now exceeds the number of immigrants.

Stephanie Wahl, of the Institute for Economics, based in Bonn, said that those who are leaving Germany are mostly highly motivated and well educated. "Those coming in are mostly poor, untrained and hardly educated," she added.

Fed up with comparatively poor job prospects at home - where unemployment is as high as 17 per cent in some regions - as well as high taxes and bureaucracy, thousands of Germans have upped sticks for Austria and Switzerland, or emigrated to the United States.

Yesterday, the country'swoes were underscored by a report which disclosed that areas of unemployment-wracked eastern Germany were populated by a "male-dominated underclass susceptible to far right ideology" because of a dramatic 25 per cent exodus of young women aged 18 to 29.

More than 18,000 Germans moved to Switzerland last year. The US was the second most popular destination with 13,245, followed by Austria with 9,309.

Switzerland already has a resident German population of 170,000. Its presence has even provoked a xenophobic backlash in the country's tabloid press. Earlier this year, the Swiss newspaper Blick ran an anti-German campaign which spoke of a "German invasion" and quoted readers who claimed they found the German immigrants to be "arrogant and rude". Many immigrants, however, say the benefits of lower taxes and pay up to three times higher than at home far outweigh the occasional xenophobic outburst.

Claus Boche, a 32-year-old executive, left the west German city of Paderborn two-and-a-half years agoto take up a job with a Swiss management consulting firm. He now lives in Zurich. "Nearly everything is less bureaucratic and more go ahead than in Germany," he said. "I also pay about 40 per cent less tax. I have no plans to go back."

The current exodus hardly fits in with the official view of the German economy, which is said to be "booming". Although jobless figures for May were reported to be marginally up yesterday, Chancellor Angela Merkel's grand coalition government of conservatives and Social Democrats has taken credit for a steady 13-month decline in the country's unemployment to below four million.

However, the gradual economic upturn has so far failed to halt an exodus of the country's well-trained. Thomas Bauer, a labour economist from Essen, was scathing about Germany's employment conditions. "Germany is certainly not attractive when compared to other countries in Europe," he said. "The taxes are too high, the wages are too low and feelings of jealousy towards high-income earners is widespread. This is a special deterrent to the highly qualified."


Scott said...

I find it very bizarre that Germany would restrict worker immigration for low-skill work such as crop-picking. I always assumed that the skilled labor force in Germany represented by the famously powerful unions would prevent immigration of skilled labor, but barring farmworkers is nonsensical.

The FT article seems to suggest, however, that the farm owners were allowed to hire foreigners to do the work but said foreigners were looking elsewhere. That suggests to me that the Poles in question were finding easier or better-paying work somewhere else.

In any case, if asparagus production in Germany were to disappear altogether, I don't think that would be much of a hardship for the German consumer. Farm owners would take it in the shorts, but they could shift to crops that could be harvested mechanically.

My sense is that the reason better-educated Germans are leaving is to find countries where entrepreneurial opportunities are better and governmental regulation of business is not so restrictive.

As far as construction goes, isn't there a huge supply of Communist-era apartment buildings in the eastern provinces sitting empty?

Edward Hugh said...

Hi scott,

"I find it very bizarre that Germany would restrict worker immigration for low-skill work such as crop-picking."

Well bizarre or not this is the situation. In Europe in general the whole discourse is about the need to attract higher skilled workers (which isn't necessarily bad, but you do need low skilled workers too, since as we see here someone needs to do the work).

In fact the restrictions on workers from the new East European members was a blanket one, without reference to skill levels.

"The FT article seems to suggest, however, that the farm owners were allowed to hire foreigners to do the work but said foreigners were looking elsewhere."

Possibly the confusion here is that these might be for temporary workers with only temporary permits to stay and work in the country. In the face of this limitation there there may well have been better opportunities available elsewhere.

"In any case, if asparagus production in Germany were to disappear altogether, I don't think that would be much of a hardship for the German consumer."

Yes, I agree. With the trade surplus they have they can easily import asparagus from elsewhere, and probably it is better for them to do this.

The article is only of interest I think due to a much bigger issue: the lack of migration into Germany, and the affect that this is having on the population pyramid.

With net migration now near zero, and fertility stubbornly stuck around 1.3, the only change we are likely to see in the German population - which is, of course, falling - is going to come from increases in life expectancy, and this, while humanely interesting, is problematic economically.

Basically the German economy needs to maintain growth if the state is to generate sufficient revenue to match the inbuilt increases in health and pension costs.

Export growth won't be sufficient on its own for this, the levels of economic activity aimed at the domestic market need to increase too. Immigration is one way to achieve this, and this is the whole point of my post I suppose.

"My sense is that the reason better-educated Germans are leaving is to find countries where entrepreneurial opportunities are better and governmental regulation of business is not so restrictive."

Well maybe, but if you have a more dynamic economy, you generate more jobs, and more interesting jobs, as well as opening up opportunities for people to use their entrepreneurial abilities. But this is just what Germany hasn't had over the last decade or so, and outside the export sector, a dynamic economy.

"As far as construction goes....."

Well I think the whole point here is that the mature economies are making a transition to services driven rather than industrial economies, and in this new profile construction seems to play a key role.

Really the similarities between Japan and Germany are very striking here: no housing boom, no strong growth in domestic consumption, and no migrants. Government policy and cultural factors are but one element. The fact is that at the end of the day there just isn't the strong jobs-demand pull that we are seeing in the younger, more dynamic economies. After all, and as we are commenting, when housing pulls in the US (or Spain) the Latinos arrive, whatever the restrictions people attempt to impose.

Anonymous said...

The is a citizenship-test since september/2008 and actually it does not help migrants good enaugh for a power-integration.

Mark said...

legitimate work from home jobs